SWOT Analysis of Samsung Electronics
Samsung Electronics as a global IT company has achieved faster growth during the recent years. The brand is operational globally with its 217 operation hubs running worldwide. Samsung Electronics is headquartered at Suwon, South Korea. The revenue of the brand reached 239.6 Trillion Korean won in 2017 rising from 201.9 Trillion Korean Won in 2016. Its business is divided into five divisions including consumer electronics, IT & Mobile communications, Semi Conductors, Displays and Harman. The IT & Mobile communications division accounts for the highest part of its revenue which was nearly 40% in 2017 followed by semi-conductors at 28%.
Americas are the biggest market for Samsung that accounted for 81 Trillion KRW revenue in 2017. Samsung is among the most popular brands in Asian markets and its influence in Asia and India has continued to grow. Several of its products including displays and Galaxy smartphones have been highly popular. However, there are several major challenges before the brand in the near term. Compared to Apple, it is still lagging behind in the area of innovation. Its financial position is stable and that can enable it to grow new channels of revenue in the future. As of the end of 2017, the brand had 320,671 employees in 73 countries. Its R&D expenditure in 2017 amounted to 16.8 Trillion KRW.
One of the key strengths of Samsung is its brand image and that’s why it is one of the most popular electronics and IT brands globally. Apart from being an innovative brand that has brought several market leading products likes Galaxy smartphone and High Definition screens, it is also known as a socially responsible brand. A strong brand image is a sign of popularity and Samsung ranks among the top brands in the Asian markets in terms of popularity. In the recent years several successful product releases and a great branding strategy have strengthened this image further.
Global presence is also a key strength of Samsung. It has 217 operation hubs operational globally. Apart from that, it has offices across 73 countries that employ around 320,671 people (as of end 2017).
Large product portfolio:
Samsung has a large product portfolio of products including semi conductors, displays, smartphones and consumer electronics as well as computer products. It also has a nice line of laptops and desktops as well as printers even if its market share in the computing industry is small. However, it surpassed Intel a few years ago to become the leading chip maker of the world.
Stronghold Asian markets:
Asian markets are Samsung’s stronghold. Both China and India are leading markets for Samsung where the popularity of its products is high. US may be the largest market for Samsung but the Asian markets are growing increasingly important for the global brands. China is a developed country and holds immense potential as a market for consumer electronics, computer parts as well as smartphones. India is also developing very fast and holds immense potential as a major Asian market.
Dominant position in smartphone market:
Around the world smartphone sales and usage are growing. A very large part of the global population uses smartphones and this market is expected to grow faster in size in future. Samsung’s smartphones have been highly popular in the global industry and its dominant position is mainly due to its Galaxy smartphones. The dominant position in the smartphone industry has played a key role in the growth of revenue of Samsung. This is also why the brand is focusing on innovation in this area so as to tap this huge market to its full potential and grow its revenues faster.
Strong focus on research and development:
Samsung is a major technology brand but the tech industry is marked by intense competition. To retain its leading position in the tech industry, the company has maintained heavy focus on research and development and invests a major sum every year. This is a critical advantage since spending on R&D enables brands to grow sources of competitive advantage as well as bring unique products ahead of their competitors. However, this focus on R&D has also earned Samsung very high level of popularity around the globe.
Weak Position in the PC market:
While the PC market has declined during the recent years, still it is a major market with huge potential. HP, Lenovo, Dell and Apple are the leading players in this industry and Samsung’s market share is much small as compared to them. While Samsung has brought a nice line of computer products still competition is intense and it has not been able to be among the top six in this industry.
Higher dependence on the American markets:
Samsung depends on the American markets for a large part of its revenue and this can be a weakness. Fluctuations in the American markets can affect its revenue and profits. To reduce it, Samsung would need to penetrate the Asian and European markets deeper. Moreover, depending too much on American markets can subject it to unnecessary pressures which can be avoided by having a more consistent performance globally.
AI and Innovation:
Technological advancement are happening at a fast pace and this offers the technology brands a major opportunity to take their products and consumer experience a step ahead of their competitors. AI is a hot area right now which can help Samsung improve its customer experience manifold. Moreover focusing on this area can help it bring superior products and grow its popularity faster. The technology market has grown highly challenging and competitive and the best option before any technology brand looking to grow its business and revenue faster is to invest in innovation.
HR in the technology industry is a major source of competitive advantage. The leading technology brands are investing in this area to hire and retain the best as well as train their employees to perform at their best. Investing in better HR management will improve Samsung’s productivity and overall performance. It must invest in training and engagement of its employees to grow its competitive advantage and revenue.
Digital marketing and supply chain management:
Digital technology has progressed fast in the recent years and brought new opportunities of marketing as well as HR and supply chain management for the business brands. Marketing and supply chain management are very important areas for any technology brand. Samsung can use digital technology to engage its customers and supplier better. Moreover, digitising the supply chain has been found to offer several important benefits like reducing costs and lead time.
Diversification and acquisitions:
Samsung must try to grow its market share and customer base through diversification and by acquiring other businesses. In the technology industry there are several related areas where diversification can easily open new channels of revenue and growth. Moreover, since Samsung is in good financial shape, it will be easy for the brand to generate new sources of revenue by acquiring other smaller businesses that strengthen its core offerings.
Competitive pressure in the consumer electronics, computing products and smartphone industry has grown. From Apple to Huawei and Xiaomi, all these brands are posing a tough challenge before Samsung. This can lead to higher pressure related to product innovation and marketing. Growing competitive pressure results in financial pressure as well.
Legal and Regulatory threats:
The legal and regulatory difficulties before the global technology brands has grown making it more difficult for them to operate internationally. While laws differ from market to market, there are several to comply and non compliance results mostly in heavy fines. From labor to environment and product safety, there are strict laws in each area that require to be complied with.
High expenses on R&D and marketing:
Expenses on research and development as well as marketing has kept growing at Samsung. The brand is facing intense competition in the global markets which is causing a rise in expenses in these areas.
Increasing raw material and labor costs:
The costs of raw material and labor have kept rising over time leading to higher operational costs for Samsung. This can be a major threat requiring better management of supply chain as well as Human resources. It also leads to higher operational costs and burden on revenue and profit margin.
Samsung is a leading chip maker and brand of smartphones. In the recent years, it has achieved major growth in revenue and profits. While its smartphone sales have grown, its revenue from chips has also grown faster. However, the competitive challenge is still intense making it mandatory for the brand to invest in R&D as well as marketing. Samsung has continued to push its investment higher in these areas. Its position in the American as well as Asian markets is strong. It must focus on making its position stronger in European and Asian markets to reduce its dependence on American markets. To grow its market share and consumer base, it must try to diversify and acquire new smaller businesses. It can also use digital technology for better engagement of its customers, employees and suppliers. Investing in innovation in areas like AI can also bring faster growth for the brand.
Samsung Annual report 2017